Cheng v. GAF Corp.

• Decision Date: 23 June 1983
• Docket Number: No. 1116,D,1116
• Citation: 713 F.2d 886
• Parties: , 32 Empl. Prac. Dec. P 33,713 James K.J. CHENG, Plaintiff-Appellant, v. GAF CORPORATION, Defendant-Appellee. ocket 82-7956.
• Court: U.S. Court of Appeals — Second Circuit

Page 886

713 F.2d 886

73 A.L.R.Fed. 257, 32 Empl. Prac. Dec. P 33,713

James K.J. CHENG, Plaintiff-Appellant, v. GAF CORPORATION, Defendant-Appellee.

No. 1116, Docket 82-7956.

United States Court of Appeals, Second Circuit.

Argued April 13, 1983.

Decided June 23, 1983.

Jonathan A. Weiss, Legal Services for the Elderly, New York City, for plaintiff-appellant.

Robert L. Jauvtis, New York City (Epstein, Becker, Borsody & Green, P.C., New York City, of counsel), for defendant-appellee.

Before FEINBERG, Chief Judge, TIMBERS and MESKILL, Circuit Judges.

FEINBERG, Chief Judge:

James K.J. Cheng appeals from a decision of the United States District Court for the Southern District of New York, 566 F.Supp. 350, Richard Owen, J., awarding appellee attorneys' fees and expenses for the costs of defending against appellant's allegedly "unreasonable and vexatious" attempts to disqualify appellee's counsel. For the reasons stated below, we reverse the decision of the district court.

I. Procedural History

An understanding of the unusual procedural history of this case is important both with respect to the threshold issue of appealability, and with respect to the merits of the appeal. Accordingly, we detail that history below at some length.

In 1977, appellant Cheng filed an employment discrimination suit against appellee GAF Corp. (GAF). Appellant was represented by Legal Services for the Elderly Poor (LSEP), and appellee was represented by the law firm of Epstein, Becker, Borsody & Green, P.C. (the Epstein firm). In 1979, an LSEP lawyer named Philip Gassel left LSEP and joined the Epstein firm. Cheng then moved to disqualify the Epstein firm from further representing GAF in this case, alleging that Gassel had been privy to confidential information regarding Cheng's suit. The district court denied the motion, but in August 1980, this court reversed on the basis of the Canons of the American Bar Association Code of Professional Responsibility, finding that there existed a danger of taint and at least the appearance of impropriety. Cheng v. GAF Corp., 631 F.2d 1052 (2d Cir.1980). In February 1981, the Supreme Court vacated this judgment and remanded, 450 U.S. 903, 101 S.Ct. 1338, 67 L.Ed.2d 327 (1981), citing the intervening case of Firestone Tire and Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981), which held that denials of motions to disqualify may not be reviewed on appeal until after trial except in special circumstances warranting a writ of mandamus. Before the remand reached this court, appellant moved to have this court consider his appeal nunc pro tunc as a request for mandamus; this motion was summarily denied.

In May 1981, appellant moved again for a disqualification order in the district court. When the district court denied this motion, plaintiff sought a writ of mandamus from this court. This petition was denied in September 1981, and plaintiff's subsequent petition for a writ of certiorari was also denied.

GAF then moved in the district court pursuant to 28 U.S.C. § 1927 ¹ for an award of attorneys' fees and costs incurred in defending against Cheng's most recent efforts to disqualify GAF, beginning with Cheng's May 1981 attempt in the district court to renew his original disqualification motion. The district court stated that it was "not prepared to fault plaintiff" for again seeking to disqualify the Epstein firm in the district court. Nonetheless, the district court found that "the subsequent mandamus [to the circuit court] ... and the subsequent application for a writ of certiorari to the Supreme Court from its denial were frivolous in the extreme and 'unreasonably and vexatiously' multiplied the costs to defendant in this case with no genuine chance of success." Thus, the district judge assessed $1,000 in attorneys' fees, costs and expenses against appellant's lawyer, not for a motion before the district court, but for the petitions filed in the appellate courts.

II. Jurisdiction

As an initial matter, appellee GAF asserts that this court lacks jurisdiction to hear this appeal. We disagree. It has long been established that a small class of orders that do not terminate the underlying litigation are appealable as collateral orders despite the finality requirement of 28 U.S.C. § 1291, which provides that "[t]he courts of appeals ... shall have jurisdiction of appeals from all final decisions of the district courts ... except where direct review may be had in the Supreme Court." See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949). To be immediately appealable, an order must meet three criteria: "[T]he order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978). In other contexts, this court has held attorneys' fee awards to be appealable collateral orders. As we stated in Seigal v. Merrick, 619 F.2d 160, 164 n. 7 (2d Cir.1980):

An award of attorney's fees does not fall within the ambit of Rule 54(b) certification, which is directed toward determinations of the parties' claims. See Swanson v. American Consumer Industries, Inc., 517 F.2d 555, 560-61 (7 Cir.1975). However, we have appellate jurisdiction under the collateral order doctrine. Cohen v. Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949); Lowe v. Pate Stevedoring Co., 595 F.2d 256, 257 (5 Cir.1979). Indeed, an early case permitting appeal from an order awarding fees before conclusion of the underlying litigation was a precursor of the Cohen collateral order doctrine. See Trustees v. Greenough, 105 U.S. 527, 531, 26 L.Ed. 1157 (1882).

The order of attorneys' fees in this case is clearly a conclusive determination. The award was based on unsuccessful appeals to this court and to the Supreme Court. Since those appeals have been rejected, there can be no new grounds for any modification of the award in the district court; appellant's lawyer has paid the $1,000 and can only look to appellate review for relief. Indeed, the district judge apparently recognized this when he declared that the award was final and appealable. ² Thus, this case is quite unlike the situation in Hastings v. Maine-Endwell Central School District, 676 F.2d 893 (2d Cir.1982), in which an interim award of attorneys' fees was assessed against a party, and was found to be not immediately appealable in part because it was subject to adjustment by the district court in its final award.

It is also clear that the fee award is completely separate from the merits of the case. As the Supreme Court stated in White v. New Hampshire Department of Employment Security, 455 U.S. 445, 451, 102 S.Ct. 1162, 1166, 71 L.Ed.2d 325 (1982), "a request for attorney's fees under § 1988 raises legal issues collateral to the main cause of action...." The Court was speaking in the context of a post-judgment award of attorneys' fees to a prevailing party in a civil rights action, but it went on to add more generally that "fee questions are not inherently or necessarily subsumed by a decision on the merits." Id. n. 13; see Goodman v. Heublein, Inc., 682 F.2d 44, 47-48 (2d Cir.1982) (fee questions separate from merits); Hastings v. Maine-Endwell Central School District, supra, 676 F.2d at 896 (same); cf. Swanson v. American Consumer Industries, 517 F.2d 555, 560 (7th Cir.1975) (award of attorneys' fees may be collateral and appealable before termination of the main case); Cinerama, Inc. v. Sweet Music, S.A., 482 F.2d 66, 70 n. 2 (2d Cir.1973). The fee award here, which was for allegedly dilatory litigation tactics, has no connection with the merits of the underlying age discrimination suit.

Appellee GAF appears to concede that the order in this case satisfies the first two criteria of appealability set out above. GAF contends, however, that the award is effectively reviewable after final judgment and therefore not currently appealable. Quoting from Eastern Maico Distributors, Inc. v. Maico-Fahrzeugfabrik, 658 F.2d 944, 947 (3d Cir.1981), GAF contends that after final judgment "the parties to the order will still be before the court, and retain the same interest in challenging the order as they have today." Eastern Maico involved several fee awards pursuant to Fed.R.Civ.P. 37, including an award against an attorney pursuant to Rule 37(a)(4). The Third Circuit refused to permit an immediate appeal, on the theory that to do so would undermine the purpose of Rule 37, which is designed, among other things, to prevent delays in discovery. But the Eastern Maico court noted that penalizing an attorney for dilatory conduct may place him in a quandary, since a lawyer may be penalized for "filing a motion which the lawyer believes necessary to protect his client's interest." Id. at 949.

We think the sanctions in this case placed Cheng's lawyer in a similar quandary. He was penalized for filing a motion he believed to be in his client's interest, a belief quite understandably strengthened by this court's prior decision in this case reversing the refusal of the district court to disqualify the Epstein firm. If appellant's lawyer is forced to await final judgment before obtaining appellate review of an award that may be personally burdensome, his position may become even more difficult. If the fee issue is linked to settlement negotiations, appellant's lawyer may be placed in an ethical dilemma; his view of any settlement proposal would almost certainly be colored by its handling of the attorneys' fee issue.

Although 28 U.S.C. § 1927, like Rule 37, is intended to prevent unnecessary delay in litigation, see H.R.Conf.Rep. No. 1234, 96th Cong., 2d Sess. 8, reprinted in 1980 U.S.Code Cong. & Ad.News 2782, we think the problems posed by postponing review outweigh the possibility...